9/06/2014

Erroneous Beliefs And Outright Lies Drive Minimum Wage Increase

As it always does, the subject of the minimum wage crops up during campaign season, and this one is no different. But unlike some campaign years, an interesting petition drive in San Diego is pushing for a ballot initiative to revoke the City Council's Minimum Wage mandate. It seems that someone in San Diego understands that, in the end, the new minimum wage is actually hurting businesses and workers.

While I am not going to delve into the battle in San Diego which includes harassment and intimidation of petition gathering volunteers as well as theft of signed petitions, I will look into the false assumptions about and outright distortions used to push for higher minimum wages.

A video by Skyler Lehto explains a number of assumptions and distortions put forth by those supporting a higher minimum wage, dispelling much of the circular logic used politicians looking to cash in by supporting it.

One of the most common claims made by those supporting a minimum wage increase is that it will help lift people out of poverty, something that Lehto covered but that I am going to reiterate. But how does locking more people out of the workforce by artificially increasing the cost of labor help anyone? Who are a majority of the people who would normally have a minimum wage job?

To answer the first question, it doesn't and it never has. Most working poor aren't making minimum wage. So how does that help them?

To answer the second question, most holding minimum wage jobs are teens or people in entry level positions. A lot of them work in the food service industry. But as minimum wage goes up for what are truly unskilled/low skill jobs, the incentive to hire them decreases. One of three things will happen: a business owner will decrease the number of staff, perhaps offering more hours to those remaining (not always sustainable because most people don't want to work 50, 60, or more hours per week every week); a business owner will hire more skilled labor since he has to pay the wages of those with medium skills, displacing the unskilled/low skill workers; or a business owner will replace some unskilled/low skill workers with automation because the labor costs have reached the point where machines are less expensive than human workers. (Think it won't happen? Guess again. McDonald's did that in France and some franchises in the US are looking at doing so in places like Illinois, the Seattle/Tacoma area, and a number of other high minimum wage locations in the country.)

One point Lehto brings up during his presentation is that the number of minimum wage jobs that existed in the 1960's was much higher than the number that exist today, and I'm not talking about as a percentage of the labor force, but in actual numbers. (The percentage is, of course, much lower today than back in 1960.) According to 2011 statistics, approximately 1.5% of the labor force (2.1 million people) make minimum wage in the US. Back in 1960 the total employed labor force was a little over 68 million (versus approximately 141 million today) and 4.7% (3.2 million) of the labor force held minimum wage jobs. (A caveat: The 1960 minimum wage jobs figure came from a number of sources, none of which I could confirm via the Department of Labor or the Bureau of Labor Statistics, so take them with a grain of salt. Also, the number of jobs covered by the minimum wage law were fewer in 1960 compared to today.)

The more we look at minimum wage and the efforts to increase it as a means of making people's lives better, the more it becomes obvious that it tends to have just the opposite effect, locking the people who need jobs the most out of the work force. People with little or no experience have even less opportunity to gain that experience because they've been priced out of the market. We're already seeing that in states and cities that have raised their minimum wage well above that of the federal minimum wage: unemployment goes up, particularly among teens and minorities. But that doesn't prevent proponents from pushing for yet another increase in the federal minimum wage. It certainly makes for good press and makes them feel like they've done something good. Too bad they're wrong.